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2026-01-20 CC Agenda Packet - ITEM D12 - Section 115 Trust for OPEB Prefunding Portfolio & Fee Review© 2025 HUB International Limited.1 © 2025 HUB International Limited. City of El Segundo Section 115 Trust for OPEB PrefundingPortfolio & Fee Review © 2025 HUB International Limited.2 © 2025 HUB International Limited.2 Mark Shuster Managing Partner & CEO mshuster@sfgrpc.com © 2025 HUB International Limited.3 © 2025 HUB International Limited.3 Agenda Fiduciary Responsibilities1 Shuster Advisory Group, LLC2 115 Trust Overview3 Pricing Comparison4 Portfolio Comparison5 © 2025 HUB International Limited.4 4 Risk & Insurance | Employee Benefits | Retirement & Private Wealth Fiduciary Responsibilities © 2025 HUB International Limited.5 Powers and Duties Common To Cities, Counties And Other Agencies CA GOVT CODE §53600.3. All governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. © 2025 HUB International Limited.6 6 Risk & Insurance | Employee Benefits | Retirement & Private Wealth Shuster Advisory Group © 2025 HUB International Limited.7 Background •For over 30 years, Shuster, and its prior affiliates have provided retirement plan consulting to both corporate and public sector plans. •Recognizing a gap in quality and independent advisory services in the public sector over a decade ago, Shuster entered the sector in 2013. •Since our first public sector client engagement in 2015, we have onboarded over 100 new agency clients, encompassing over 225 public agency plans. Currently, we serve as the adviser for more than 250 qualified retirement plans. •Our comprehensive plan audit, RFP process and investment advisory services have resulted in significant cost reductions and improved safety of principal options for plan participants. •Unwavering focus on delivering state-of-the-art, low cost and compliant retirement plans to our plan sponsor customers and their employees. © 2025 HUB International Limited.8 Shuster Advisory Group •SEC-Registered Investment Advisor w/ $10.5B+ in assets under management / advisement •Fiduciary to plan investments •Must act in the best interest of the plan and participants as a whole •Provides ongoing investment management, plan level and participant services •Reduces plan and investment fees that employees are charged •Independent/non-proprietary © 2025 HUB International Limited.9 Plan Consulting Services Defined Contribution •457(b) •457(f) •401(a) •401(k) •403(b) •415(m) •PT-OBRA/ Social Security Alternative Retiree Medical Reimbursement Pension •Defined Benefit •Cash Balance •Supplemental Defined Benefit Future Liability Prefunding (115 Trust) •Pension •OPEB Operating Reserves/Cash Accounts •Cash Management •Bonds •Pooled Cash •CD’s © 2025 HUB International Limited.10 Antelope Valley Medical Center Chino Valley Fire District Conejo Recreation & Park District (CRPD) County Commissioners’ Association of Ohio (CCAO) County of Modoc First Public Hydrogen Authority Hesperia Fire Protection District Hesperia Water District Madera Irrigation District Midway City Sanitation District Mountains Recreation & Conservation Authority (MRCA) Ohio County Employees Retirement Plan (OCERP) Ontario International Airport Authority Orange County Fire Authority (OCFA) Regional Center of the East Bay San Bernardino Water District South Bay Regional Public Communications Authority Three Valleys Municipal Water District Trinity County Waterworks Valley-Wide Recreation & Park District West Valley Water District Cities and Public Agencies We Proudly Serve The cities and agencies listed above do not expressly recommend Shuster Advisory Group, a HUB International Company. American Canyon Arcadia Artesia Azusa Baldwin Park Bell Bell Gardens Bellflower Beverly Hills Canyon Lake Carson Cathedral City Chino Claremont Clovis Colton Commerce Covina Downey Eastvale El Segundo Emeryville Fontana Los Gatos Manhattan Beach Montebello Monterey Park Moraga Moreno Valley Morgan Hill Norwalk Oakley Ontario Orange Oxnard Palmdale Palm Desert Palo Alto Perris Pico Rivera Pismo Beach Placentia Pleasant Hill Rancho Cordova Rancho Mirage Rancho Palos Verdes Redlands Rialto Riverside San Bernardino San Dimas San Fernando San Juan Capistrano San Pablo Santa Fe Springs Sebastopol Scotts Valley Signal Hill South Gate Stanton Stockton Temecula Union City Upland Vernon Walnut Whittier Wildomar Fullerton Gardena Glendora Hemet Hermosa Beach Hesperia Huntington Park Indian Wells Inglewood Jurupa Valley Laguna Hills La Mirada La Palma La Quinta La Verne Lafayette Lakeport Lakewood Lancaster Lomita Lompoc Los Altos © 2025 HUB International Limited.11 11 Risk & Insurance | Employee Benefits | Retirement & Private Wealth 115 Trust Overview © 2025 HUB International Limited.12 What is a Section 115 Trust? •Authorized by the Internal Revenue Code •Allows for the segregation of funds from general assets •Integral-Part Trust •Used for funding essential government functions -Pension funding and post-employment obligations are considered essential −Considered a best practice by the Government Finance Officers Association (GFOA) •The Trust is irrevocably committed to the specific government/district function -Assets cannot be diverted © 2025 HUB International Limited.13 Why Use a Section 115 Trust? Uses of the Trust •Prefund pension contribution liabilities •Prefund OPEB benefit liabilities •Used as a budget stabilization tool Benefits •Non-taxable: Investment earnings are non-taxable •Flexible: Investment restrictions applicable to the general fund do not apply -Allows for use of relatively higher discount rate •Investment Growth: Allows for investment growth under the Town’s chosen strategy •Liquidity & Budget Stability: Assets can be accessed in years of budgetary stress to smooth contributions •Demonstrated Fiscal Discipline: Considered a best practice by the Government Finance Officers Association (GFOA). IRS approval not required and no annual IRS filings. •Offset OPEB Liability: For GASB 75 reporting, the OPEB liability is reported net of Trust assets. Pension 115 Trusts are reported as a fiduciary fund. © 2025 HUB International Limited.14 115 Trust Components •Agency authorization to participate in the Trust and authorized signers •Documents —Trust Document and Adoption Agreement (for Multiple Employer Trusts) —Administrative Services Agreement —Investment Fiduciary Agreement —Investment Policy Statement •Investment Portfolio •115 Trust Roles —Administrator —Investment Advisor/Fiduciary —Directed Trustee —Custodian Note: Independent actuarial annual valuation of assets required © 2025 HUB International Limited.15 Financial Components Platform Fees: ● Trust ● Custody Advisor Fees: ● Fiduciary ● Consultant Investment Portfolio Performance © 2025 HUB International Limited.16 Key Capabilities for Cities and Agencies •Investment Fiduciary •Consolidated full fee transparency •Customizable investment portfolios •Individual Accounts (assets are not pooled) •Daily valuation and account access •Custom reporting •Low cost •Local dedicated service team •Direct access to Portfolio Management team •Private equity/debt (optional) •GASB compliant reporting •Compliant with Internal Revenue Code Section 115 © 2025 HUB International Limited.17 115 Trust Program Trust Administrator, Consultant & Investment Advisor Directed Trustee Custodian •Program Coordinator •Trust Administrator •Plan Consultant •Independent and Non-Proprietary •$10.5B+ in Assets Under Management/Advisement •Discretionary Independent Investment Advisor & Fiduciary •Investment Policy Assistance •Federal and State Compliance Monitoring •Ongoing Trust Management •White Glove Client Support •Safekeeping of Assets •Trade Processing •Reporting •Paying Agent •$390.8B in Fiduciary Assets •$11.83T in Total Client Assets (11/30/2025) •Schwab Trust Partner for over a decade •Federal and State Compliance Monitoring •Supervises the selection, monitoring and management of plan assets •Subject to direction of investment fiduciary •Turn-Key Trust Services © 2025 HUB International Limited.18 Unique Program Benefits vs. CalPERS Individual Accounts (not pooled!) Local, Dedicated Service Team Flexible, Qualified Distribution Timing Custom Investment Policy Statements (IPS) Mutual Indemnification Language Consolidated Fee Transparency © 2025 HUB International Limited.19 Unique Program Benefits vs. CalPERS Customizable Portfolios 10 Base Portfolio Models with Custom Options Available Active/Passive Blend or Fully Passive Access to Investment Management Team Termination, Trustee-to- Trustee Transfer within 60 Days 30-day Notice, Council Approved Resolution Daily Transfers* Non-Shuster information was obtained from documents provided by Shuster clients and market research and assembled for simplification purposes only and not guaranteed by Shuster. Any discrepancy is purely accidental. *During U.S. Stock Market hours © 2025 HUB International Limited.20 20 Risk & Insurance | Employee Benefits | Retirement & Private Wealth Portfolio Comparison © 2025 HUB International Limited.21 Our Investment Process We start by learning all about your needs and objectives. We base asset class weightings in each strategy on the interplay between credit risk, interest rate risk, and equity risk. Credit spreads are analyzed against historic levels and we make allocations formulated on relative valuations. We evaluate monetary policy and interest rate projections to optimally allocate amongst fixed income investments. Interest rate risk is factored in to provide a cushion in case of extreme economic deterioration and equity market declines. We use relative values of each equity asset class (domestic, small cap, large cap, international, specialty) to determine equity allocations. Based on your portfolio construction strategy, we analyze qualitative and quantitative factors to select individual investments. Each quarter we repeat the portfolio construction and investment selection process taking current economic indicators into account. We meet with you to review economic forecasts, investment results, and your goals to decide if portfolio changes are required. Client Financial Analysis Efficient Portfolio Construction Investment Selection Portfolio Rebalancing Regular Reviews © 2025 HUB International Limited.22 115 Trust Investment Portfolio Options All OPEB and Pension Stabilization portfolios are fully customizable 11 base portfolios are offered Individual Portfolios Base portfolio options (active/passive blend) 1. All Fixed - 0/100% 2. Conservative - 10/90% 3. Conservative - 20/80% 4. Moderate Conservative - 30/70% 5. Moderate - 40/60% 6. Balance - 50/50% 7. Moderate Growth - 60/40% 8. Moderate Aggressive - 70/30% 9. Growth - 80/20% 10. Aggressive - 90/10% 11. All Equity - 100/0% CERBT (OPEB): 1. Strategy 1 - 70/30% 2. Strategy 2 - 50/50% 3. Strategy 3 - 40/60% CEPPT (Pension): 1. Strategy 1 - 50/50% 2. Strategy 2 - 30/70% Index only no customization available 3 options for CERBT (OPEB) 2 options for CEPPT (Pension Prefunding) Pooled Portfolios CalPERS © 2025 HUB International Limited.23 Institutional Portfolio Structures CALPERS PENSION (PERF)* SHUSTER 115 TRUST CALPERS 115 TRUST (CERBT/CEPPT) ENDOWMENTS • Vanguard • Fidelity • BlackRock • T. Rowe Price • State Street • PIMCO • JPMorgan • Morgan Stanley • Capital Group • Other Public Managers • Apollo • Blackstone • Blue Owl • Carlyle • Cliffwater • KKR • Partners Group • Oaktree • Ares • Other Private Managers • State Street • Vanguard • Fidelity • BlackRock • T. Rowe Price • State Street • PIMCO • JPMorgan • Morgan Stanley • Capital Group • Other Public Managers • Apollo • Blackstone • Blue Owl • Carlyle • Cliffwater • KKR • Partners Group • Oaktree • Ares • Other Private Managers • Vanguard • Fidelity • BlackRock • T. Rowe Price • State Street • PIMCO • JPMorgan • Morgan Stanley • Capital Group • Other Public Managers * CalPERS PERF investments are managed by the CalPERS Investment Office under the direction of the CalPERS Board of Administration. The portfolio is broadly diversified across public equities, fixed income, private equity, real assets, and liquidity, and is managed in line with the System’s strategic asset allocation, fiduciary standards, and long-term objectives. While CalPERS hires external investment managers, the specific managers selected and their mandates are not publicly disclosed. • Apollo • Blackstone • Blue Owl • Carlyle • Cliffwater • KKR • Partners Group • Oaktree • Ares • Other Private Managers © 2025 HUB International Limited.24 Institutional Portfolios – UC Universities *Institutional Portfolios – UC Universities * * Based upon data publicly available. Data as of fiscal year end 6/30/2024. Campus US Equity Non-US Equity Global Equity US Fixed Income Non-US Fixed Income Absolute Return Real Assets Real Estate Private Equity Private Credit Other Cash Equiv. Regents' GEP 13.3% 1.9% 32.4% 7.5% 0.0% 3.9% 2.6% 12.4% 21.1% 4.2% 0.0% 0.7% Blue & Gold 86.0% 0.0% 14.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Berkeley 11.0% 12.3% 16.2% 3.4% 0.0% 17.2% 1.9% 3.8% 23.9% 0.0% 4.9% 5.4% Davis 27.4% 7.6% 3.5% 6.1% 0.0% 3.2% 4.2% 11.3% 29.6% 4.0% 0.0% 3.1% Irvine 18.4% 11.5% 18.1% 12.1% 0.0% 10.5% 6.0% 0.0% 19.0% 4.0% 0.0% 0.4% Los Angeles 0.0% 0.0% 38.0% 4.7% 0.0% 20.6% 7.4% 6.6% 21.7% 0.0% 0.2% 0.8% Merced 13.3% 1.9% 32.4% 7.5% 0.0% 3.9% 2.6% 12.4% 21.1% 4.2% 0.0% 0.7% Riverside 13.3% 1.8% 32.0% 7.5% 0.0% 3.8% 2.6% 12.3% 21.6% 4.2% 0.0% 0.9% San Diego 31.3% 0.0% 32.5% 5.2% 0.0% 2.7% 1.8% 8.7% 14.4% 2.9% 0.0% 0.5% San Francisco 0.0% 0.0% 26.8% 0.0% 0.0% 20.6% 0.0% 3.0% 34.3% 5.4% 0.0% 9.9% Santa Barbara 12.9% 1.8% 31.1% 7.3% 0.0% 3.7% 2.5% 11.9% 21.1% 4.0% 0.0% 3.6% Santa Cruz 13.3% 1.9% 32.4% 7.5% 0.0% 3.9% 2.6% 12.4% 21.1% 4.2% 0.0% 0.7% © 2025 HUB International Limited.25 25 Risk & Insurance | Employee Benefits | Retirement & Private Wealth Pricing Comparison © 2025 HUB International Limited.26 Service Provider Fee Comparison Pension Stabilization Pension Stabilization Assets as of 1/14/26: $7,184,728 Service Administration PARS4 0.25% Shuster Advisory Group, LLC 0.05%1 Custody Charles Schwab Trust Bank 0.01%2 Trustee Alta Trust 0.02%3 Investment Management HighMark Shuster Advisory Group, LLC 0.22% Administrative Costs Total 0.57% Total 0.30% Previous PARS Program Current Shuster Program US Bank5 0.32% 1 - Shuster Administration Fees will convert to a flat dollar fee after the end of contract year-3 based on the highest year-end balance of the first 3 contract years. 2 - Transaction fees may apply and are disclosed in the Schwab fee schedule. Schwab fee is 0.01% and annual minimum is $400 per plan. 3 - Alta Trust fee is 0.02% and has an annual maximum of $5,000 per plan. 4 - Based on PARS Administrative Services Agreement provided by City. 5 - Based on PARS Discretionary Trustee/Investment Management Fee Schedule provided by City. Fees are annualized based on 1/14/26 assets. The fees shown above are estimates based on documents provided by City and available market data and are summarized for simplification and presentation purposes only. Actual fees may be determined by auditing all account statements and service contracts. Any variance in fees is purely accidental. PARS Trust Administration Fees (Per Annum)Discretionary Trustee Fees (Per Annum) For Plan Assets from: For Plan Assets from: $0 - $10,000,000 0.25% $0 - $5,000,000 0.35% $10,000,001 - $15,000,000 0.20% $5,000,001 - $10,000,000 0.25% $15,000,001 - $50,000,000 0.15% $10,000,001 - $15,000,000 0.20% $50,000,001 and above 0.10% $15,000,001 - $50,000,000 0.15% $50,000,001 and above 0.10% © 2025 HUB International Limited.27 1 - Fees are calculated based on the expenses reported on the PARS Administrative Services Agreement, PARS Discretionary Trustee/Investment Management Fee Schedule, and CERBT March 2025 Account Update Summary provided by the City. 2 - Shuster Administration Fees will convert to a flat dollar fee after the end of contract year-3 based on the highest year-end balance of the first 3 contract years. 3 - Transaction fees may apply and are disclosed in the Schwab fee schedule. Schwab fee is 0.01% and has an annual minimum of $400 per plan. 4 - Alta Trust fee is 0.02% and has an annual maximum of $5,000 per plan (which equates to 0.0015% based on assets shown). Fees are annualized based on 3/31/25 and 1/14/26 assets. The fees shown above are estimates based on documents provided by City and available market data and are summarized for simplification and presentation purposes only. Actual fees may be determined by auditing all account statements and service contracts. Any variance in fees is purely accidental. Service Provider Fee Comparison OPEB and Pension Stabilization OPEB Assets as of 3/31/25: $35,610,345 Pension Stabilization Assets as of 1/14/26: $7,184,728 Total Assets : $42,795,073 Service Administration PARS1 0.25% Shuster Advisory Group, LLC 0.01%2 Custody Charles Schwab Trust Bank 0.01%3 Trustee Alta Trust 0.015%4 Investment Management HighMark Shuster Advisory Group, LLC 0.085% Administrative Costs Total 0.57% Total 0.05% Total 0.12% Previous PARS (Pension Stab.) Program Current CERBT (OPEB) Program Shuster Program (OPEB & Pension Stabilization) 0.05%CalPERS1US Bank 0.32% Blended Total: 0.135% © 2025 HUB International Limited.28 Implementation Council Presentation • Approval of Trust • Delegation of Authority Document Completion (7-14 days) • Trust, Shuster, & Schwab (signature ready documents provided) —Utilize DocuSign for ease of signature —Discuss and finalize Investment Policy Schwab Account Setup (5-10 business days) • Approval of Trust • Delegation of Authority Funding • Wire or ACH to Schwab © 2025 HUB International Limited.29 Thank you © 2025 HUB International Limited.